Intel Not To Blame For Micron Selloff

Intel stock is down 8% year to date, while Micron shares have lost 54% during the same period. Sterne Agee CRT’s Douglas Freedman believes the recent sell-off in the Micron shares is mainly because the market has misinterpreted Intel’s $5.5 billion investment in non-volatile memory production. Micron crashed more than 10% on Tuesday, when reports of Intel’s investment came up.

No worry for Micron

Intel recently announced an up to $5.5 billion investment in its Dalian, China factory to upgrade the non-volatile memory capacity. The investment will be spread over several years. Such a move reflects the chip maker’s growing confidence in the technology being the long-term growth driver, said Freedman.

Intel’s decision to invest in China in no way indicates its plan to end its alliance with Micron, the analyst said. The deal between the parties remains unchanged, and Intel will offer 3D Xpoint and 3NAND to Micron if its production capacity fails to meet the demand.

“We believe the new investment target has been discussed by both INTC and MU, thus indicating both companies confidence in 3D NAND and Xpoint – a new memory technology developed by the JV,” the analyst said.

Freedman has a Buy rating on both Intel and Micron, with a price target of $38 and $20, respectively.

Analysts bullish on Intel

Separately, Jefferies maintained its Buy rating on Intel with a price target of $38, in a report dated Oct 21, 2015. Jefferies raised the price target on the chip maker from $37. Barclays also restated their Buy rating on the stock with a price target of $38, in a report on Wednesday. In an analyst note on Thursday, Cowen maintained a Market Perform rating on the chip maker with a price target of $39.

Of the 38 equity analysts covered by Thomson Reuters, five have a Sell rating on Intel, 23 rate it a Buy while 20 see it as a Hold. Presently, Intel has a consensus price target of $34.9.

Of the 34 analysts covering Micron, 25 consider it a Buy, and seven rate it a Hold. The stock has an average price target of $21.59.

In pre-market trading Thursday, Intel shares were up 0.84% at $33.65, while in the last three months, the stock is up almost 18%. Micron shares were up 0.06% at $16.33 around 9.30 am EDT Thursday, and over the last three months, the stock is down almost 9%.